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Executives

Kathleen Fredriksen - Director of Corporate Development

Mark R. Baker - Chief Executive Officer, Director, Member of Science & Technology Committee and Member of Strategy & External Technology Subcommittee

Angelo William Lovallo - Principal Financial Officer, Principal Accounting Officer, Vice President of Finance and Treasurer

Analysts

Brian Klein - Stifel, Nicolaus & Co., Inc., Research Division

Jonathan M. Aschoff - Brean Capital LLC, Research Division

Ryan Martins - Lazard Capital Markets LLC, Research Division

Progenics Pharmaceuticals (PGNX) Q2 2013 Earnings Call August 9, 2013 8:30 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the Progenics Pharmaceuticals Second Quarter 2013 Results Conference Call. [Operator Instructions] And as a reminder, this call is being recorded. I would now like to turn the conference over to Kathleen Fredriksen. Please go ahead.

Kathleen Fredriksen

Thank you, Pablo. Thank you for joining our conference call today to discuss the second quarter financial results and business update. With me on the call today are Mark Baker, CEO; and Angelo Lovallo, Vice President, Finance and Treasurer.

Before we begin, I will remind you that remarks made on this call that are not historical in nature may be forward-looking statements, and are subject to a number of risks and uncertainties. Our actual results may differ materially. Such remarks may include, but are not limited to, those involving regulatory actions, clinical, developmental and other matters related to PSMA ADC, RELISTOR and our other product candidates; our business and commercialization strategies and expectations of future growth, revenues and assessments of our competitive position.

Please refer to our Form 10-Q and other filings with the U.S. Securities and Exchange Commission for more information on the risks that could cause our actual results to differ. As a reminder, statements made today are as of August 9 only.

I will now turn the call over to Chief Executive Officer, Mark Baker. Mark?

Mark R. Baker

Thanks, Kathleen, and good morning, everyone. This is our first time speaking with you since we hosted our first Investor and Analyst Day last month. I'd like to thank Dr. Jonathan Simons, CEO of the Prostate Cancer Foundation; and Dr. John Babich, Co-Founder of Molecular Insight. Each of them contributed significantly to a robust program that got positive feedback from many attendees. And we're looking forward to hosting similar events in the coming years.

You can still view the presentations and replay the webcast in the Media Center of our new website. I think the team did an excellent job on the new website, and I hope you've had a chance to take a look around.

When we last spoke after the first quarter, I was excited to share with you that we had nearly completed integrating Molecular Insight, an acquisition that significantly increased our assets, including late-stage oncology compounds. We accomplished this while reducing our real estate footprint and with virtually no change to our headcount or G&A expenditure rate.

Since then, we've completed a public offering, including exercising the Greenshoe option, for a total of 9.8 million primary common shares, resulting in approximately $40 million in net proceeds that will support our focused growth as an efficient and productive oncology company.

I continue to believe it is essential to maintain a level of financial strength that enables us to further existing programs while pursuing additional business and development opportunities.

Another important event in our growth plan is bringing on our new Executive Vice President of Research and Development. I hired Dr. Hagop Youssoufian to oversee our research and development efforts and to help bring our oncology programs towards commercialization. What excites me about Hagop is his well-deserved reputation as a hard worker, who develops and executes great strategic visions and who doesn't shy away from tough decisions.

Hagop's experience includes senior roles at ZIOPHARM Oncology, ImClone, sanofi-aventis and Bristol-Myers Squibb. He is an excellent complement to our team. We're delighted to benefit from his broad and deep experience.

As we recently provided an in-depth update of our product candidates at the Investor and Analyst event, we will not belabor those subjects here. But I will summarize by saying that we are continuing to move forward with 3 late-stage oncology programs, while evaluating additional development options.

With that, I'll turn the call over to Angelo for a discussion of the past quarter's financial results.

Angelo William Lovallo

Thanks, Mark. If you reviewed details of our financials in the press release we issued this morning and in our 10-Q, let me discuss now some financial highlights behind the corporate milestones Mark already has mentioned.

Net loss for the quarter was $12.3 million or $0.24 diluted per share compared to a net loss of $10.7 million or $0.32 diluted per share in the 2012 period. This increased loss was due, primarily, to higher R&D expenses, partially offset by lower G&A expenses for the quarter of $0.6 million. I'm pleased to note our work towards controlling expenses is evident in reduced G&A expenses for the quarter, while we continued to advance product development in a right-sized facilities footprint.

We ended the quarter with cash, cash equivalents and securities of $81.4 million, an increase of $23 million in the quarter that includes proceeds from the primary portion of the offering Mark mentioned earlier, but not from the Greenshoe, which we received additional proceeds of $5.3 million in the third quarter. Second quarter R&D expenses were up $2.1 million over the prior-year period, primarily due to increased clinical trial and lease termination expenses, partially offset by a decline in compensation expense. Second quarter revenue was $1.8 million, even with the corresponding 2012 period. Royalty income was $1.2 million in the second quarter versus $1.6 million in the 2012 period, based on RELISTOR sales reported to us by Salix.

With that, I will turn the call back to Mark.

Mark R. Baker

Thanks, Angelo. We are executing successfully against our aggressive plan to become a preeminent oncology company. And while it's not a glamorous side of our business, I think that you can see that in this quarter, many of our accomplishments are nuts and bolts business building, fortifying our financial resources, attracting great talent, controlling costs, using space wisely and communicating consistently and clearly with our stakeholders.

Product development is a complicated and lengthy process, and we continue to build an organization that I think is suited for the long-haul, which we hope is to the ultimate benefit of our shareholders and the patients who are counting on us.

Thanks for your attention. Now I would like to take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question from the queue is from Brian Klein of Stifel.

Brian Klein - Stifel, Nicolaus & Co., Inc., Research Division

Just wondering if you can give us some updates on the timing for the RELISTOR advisory panel?

Mark R. Baker

Yes. Brian, we still do not have a date from the FDA on the panel. Salix announced on their call last night that, in their discussions with the FDA, they believe that a date will be set, I believe, they said in the coming weeks or in about the next month. So we're awaiting that decision from the agency. And I think it will be in that kind of time period.

Brian Klein - Stifel, Nicolaus & Co., Inc., Research Division

Great. And can you give us the makeup of the panel? Do you anticipate it's going to be held within the GI division and will it include cardiologists?

Mark R. Baker

We don't know exactly in which division it will be held at this point. I think that's something that the FDA is working on. But we do expect, based on our communications with the FDA, that it's going to be a multidisciplinary approach, with representatives from cardiorenal, from the pain division, from the GI [ph] division. So we do expect to see a multiple of the divisions involved.

Brian Klein - Stifel, Nicolaus & Co., Inc., Research Division

Great. And then lastly, can you give us a sense of timing for Phase II data readout for PSMA ADC?

Mark R. Baker

I think that, that trial continues to enroll well. So I've been pleased by that. We continue to expect that we will be able to complete enrollment by the end of the year, with a data readout in the early part of next year at an appropriate scientific conference.

Operator

Our next question in queue is from Jonathan Aschoff of Brean Capital.

Jonathan M. Aschoff - Brean Capital LLC, Research Division

I was wondering, could you help us understand what would be, in your view, at least a robust set of results for the imaging PSMA program?

Mark R. Baker

So you'll recall, with the imaging agent, the 1404 imaging agent, we are also in a Phase II trial. With that program as well, we're expecting that the data would -- that the trial will be completed by the end of the year, with a data readout in early next year. The primary focus of that trial is on establishing the accuracy of the test, the specificity and sensitivity of the test. So I think what we're looking for in that program is a good outcome in terms of that accuracy. And that's the primary focus of the trial, and that's what we'll be looking for in terms of the readout.

Jonathan M. Aschoff - Brean Capital LLC, Research Division

And then I guess, my next question is kind of a, "Does the FDA get it?" question. Are they comforted by the fact that oral RELISTOR is over 90% luminally-restricted when they speak in terms of CV and words like withdrawal and things, do they take a great deal of comfort in that? Or is it even more comforting to them that the subcu, despite it being advanced medical illness, has been on the market since '08? Where are they on this drug versus one another?

Mark R. Baker

Yes. It's difficult for me to say where the agency is. Of course, the concern that they brought up with respect to the possibility that RELISTOR was causing opioid withdrawal was with respect to the subcu. That comment did not -- it came up in the review of the subcu and not the oral. So I don't think I can comment on how they are seeing the oral as it relates to the opioid withdrawal issue because we have not had that discussion with them. But I think the point that you make is a great one, that with the oral formulation, the safety profile appears to be even better than the subcu. And with the subcu, we see the agency saying, "Okay, we're going to go to the Advisory Committee to have them balance the benefits of this drug against what we believe to be a hypothetical risk that they've raised because we don't see that -- the risk appearing in our data."

Jonathan M. Aschoff - Brean Capital LLC, Research Division

And do you even know if those withdrawal cases were in patients that did not miss opiates, or actually were they so managed with AMI, that they were given their opiates and didn't take them themselves?

Mark R. Baker

Of course, we are treating, with RELISTOR, people who are habituated to opioids. And we know that people who are habituated to opioids can go through withdrawal. Their dosage needs to be constantly monitored. So it is possible that events of withdrawal that were seen in our database of the so-called signs and symptoms of opioid withdrawal that the FDA pointed to in their complete response arise simply because of what's happening with that person taking the opioids. But again, I think this is something that the FDA is going to look to the Advisory Committee to weigh.

Jonathan M. Aschoff - Brean Capital LLC, Research Division

Yes, I mean, I've seen more withdrawal with chronic OIC drugs not owing to the chronic OIC drug.

Mark R. Baker

No, and certainly, our view is that is an important factor, yes.

Operator

[Operator Instructions] Our next question in queue is from Ryan Martins of Lazard Capital Markets.

Ryan Martins - Lazard Capital Markets LLC, Research Division

Maybe on, just, the run rate for RELISTOR. It seems like the sales, you had about $15 million in the first half of the year. But I think the guidance is for about $45 million. Just wondering what gives the confidence for Salix to get to that number?

Mark R. Baker

Yes. We saw, again, last night on the Salix call that they have reiterated their annualized run rate, which is the -- a term that they use as they project forward sales, at $45 million. I think, it's varied between $44 million and $45 million, so it's been steady in terms of their guidance. The net sales that were reported to us in this quarter were affected by returns in this quarter. The initial inventory of pre-filled syringes, which you may recall, was launched at the beginning of 2012, were relatively short-dated because stability was just being established for the product. So they did have returns in this quarter, which brought down the net sales, which were paid on. But I noted in the Salix call yesterday that they spoke about a very substantial increase in scripts for RELISTOR in the quarter over the prior-year quarter. And in our discussions with them, they continue to be optimistic about the sales trends for RELISTOR. So I think that, that is what is giving them confidence, and we are basing our numbers and our discussions with you based on what we're hearing from them.

Ryan Martins - Lazard Capital Markets LLC, Research Division

I guess, can you quantify what those returns are and are we going to see returns, given obviously this is an ongoing -- since you launched and given that this is ongoing, can we see returns in future quarters, too?

Mark R. Baker

Yes. So the sales deductions from gross to net in this quarter were $3.8 million, and this was a very substantial increase, about 250% over deductions that we've seen in prior quarters. And when we asked Salix about it, they attributed this change to the returns coming from short-dated initial inventory. They indicated to us that they did not see this as being a long-term problem and that we were just moving through this. But again, our information comes from them.

Ryan Martins - Lazard Capital Markets LLC, Research Division

Okay. And do you have an idea of how much short-dated inventory is still out there?

Mark R. Baker

I'm sorry, could you say that again?

Ryan Martins - Lazard Capital Markets LLC, Research Division

Do you have an idea of how much short-dated inventory would still be out there?

Mark R. Baker

I don't particularly have that, no.

Ryan Martins - Lazard Capital Markets LLC, Research Division

Okay. And then, in terms of the panel here for RELISTOR, I believe Salix may have indicated yesterday that they seem to indicate some openness to, maybe, a cardiovascular outcome study being done for the oral. Obviously, they were -- they said they would not be interested in or are not interested but at least, likely to do a study in -- with the subcu version. Any thoughts around that? Any color on maybe openness to do something with the oral versus subcu?

Mark R. Baker

Well, what I took Bill Forbes of Salix to be saying was that if the cardiovascular outcomes trial was required by the agency, that he would like to do that trial with the oral and not with the subcu. And I think all of us who have been looking at the situation, over time, would agree with that. Long-term safety -- cardiovascular outcomes trial with the subcu could be very difficult to enroll because of the inconvenience associated with injecting yourself and particularly with a placebo. And we believe, and have always believed, that the oral formulation has the best commercial opportunity. So if you're going to invest in a cardiovascular outcomes trial, I think you would invest in the oral formulation. But I didn't take him to be saying that he expected there to be a cardiovascular outcomes trial. That's a possible outcome from the AdCom. But I think the AdCom has, at least, given me -- the decision by the FDA to go to the AdCom, has at least given me some optimism that we will not have to have a cardiovascular outcomes trial for the subcu in order to get to approval. But again, I think this is something that will be put in front of the Adcom, and that they'll consider in the course of their deliberation.

Ryan Martins - Lazard Capital Markets LLC, Research Division

Okay. And finally, just on that drug, do you have a date for your meeting with the FDA? I know you said it should happen maybe sometime this quarter.

Mark R. Baker

Yes, we're back and forth with the agency on that. We do not yet have a date for a meeting. But I do expect that we'll see a decision as to which way to go based on feedback from the FDA in the quarter.

Operator

And with that, I'm showing no further questions in queue. I'd like to turn it back to Kathleen Fredriksen for any further comments.

Kathleen Fredriksen

Thanks, Pablo. That concludes today's update. Thanks for joining us, and have a great day.

Operator

Thank you. And again, thank you, ladies and gentlemen, for joining today's conference. You may now disconnect. Have a great day.

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